Things continue to worsen in the relationship between Anglo-Australian mining giant Rio Tinto
As you recall, last year witnessed a tremendous run-up for most commodity prices, only to see them suddenly roll over and plunge back to earth. While this strange series of events was occurring, the big three suppliers -- Brazil's Vale
But when commodities began to roll over, the shoe was suddenly on the other foot. And when this year's benchmark iron ore price was being negotiated, the first deal occurred between Rio and Japan's Nippon Steel. It represented a 33% decline from last year. Meanwhile, the Chinese were holding out for a 40%-45% drop. Indeed, even the world's biggest steelmaker, Arcelor Mittal
Obviously, China is trying to get its arms around as many of the world's commodities as possible. Not long ago, Aluminum Corp. of China
Complicating matters in the meantime is Stern Hu, head of Rio's iron ore operations in China, currently languishing in a Chinese jail after being charged with industrial espionage. When formal pricing conversations will resume is anyone's guess. Until that changes, the Chinese are buying Rio Tinto's iron ore on a "provisional" basis, based on the Japanese discount price.
From an investing perspective, my advice to Fools is to keep a close eye on these unfolding Chinese events. And beyond that, I continue to look positively on Rio and BHP. As such, I don't think you can go wrong with positions in either.
Rio Tinto and BHP Billiton both wear four stars as accorded by the Motley Fool CAPS community. Why not go over to CAPS and weigh in with your assessment of each?